ED issues notice to Karti Chidambaram for forex violations

ED issues notice to Karti Chidambaram for forex violations
Former Finance Minister P Chidambaram's son Karti was in for more trouble on Monday with the Enforcement Directorate serving a show cause notice to him on charges of a Rs 45 crore forex violation.

The action against Karti, M/s Advantage Strategic Consulting Pvt Ltd (ASCPL) and its Directors is linked to the show cause notice to Chennai-based Vasan Health Care Pvt Ltd, its overseas investors, promoter AM Arun, his wife and father-in-law Dwarakanathan for forex violations to the tune of Rs 2,262 crore.

According to the ED, the Vasan Health Care had received investments of around Rs 432 crore from funds of Mauritius-based Sequoia and West Bridge during 2009-14 through Compulsorily Convertible Preference Shares bought directly from the company.

Investigators also found out Arun's wife transferred three lakh equity shares to her father Dwarakanathan for free and immediately half of it were transfered to ASCPL, "who were never connected to the activities till that date", the ED said in a statement.

"Although the shares had a total face value of Rs 1.5 crore and was acquired by the original allottee for Rs three crore, which included a premium of Rs 1.50 crore, ASCPL paid to Dwarakanathan Rs 50 lakh only and that to after a period of more than one year from the date of transfer of shares," it said. Arun also facilitated the selling of 30,000 of the ASCPL shares to Sequoia while he was selling his stakes and then ASCPL paid another Rs one crore to Dwarakanathan.

It came to light during investigations that various agreements were entered from time to time between company, promoters, investors and seller of shares and the overseas investors were given assurance of returns in one form or another, which is against the spirit of FEMA. It was also found that the price/conversion formula have not been determined upfront.

"Further, the parties to the agreement, agreed to a profit sharing mechanism through which the transferee agrees to pay the transferor a 'Sale Profit' derived during the exit mechanism. Such clauses are akin to deferment of payment and are not permitted without the approval of RBI," the ED said.

The total amount of contravention by Vasan Health Care and overseas investors amount to Rs 2,100 crore. The ED has also found violation of Rs 162 crore for an investment in Singapore without receiving mandatory share certificates.

According to the ED, the total amount of contravention identified on different counts and found to have been committed by ASCPL in the sale transaction of shares of Vasan to overseas investors is around Rs 45 crore.
 
‘Charges recycled’
Congress leader P Chidambaram on Monday accused the ED of “recycling allegations” against his son Karti, reports Deccan Herald.

“No notice has been served upon Karti Chidambaram so far. If a notice is received, a suitable reply will be sent,” he said. “By targeting Karti with baseless notices, the government cannot silence my voice or stop my writing,” the senior Chidambaram said.

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